EUR/USD Price Analysis – Nov 27, 2024
Daily Price Outlook
During the European trading session, the EUR/USD pair continued its upward momentum, reaching an intra-day high of 1.0539. The pair strengthened as the US Dollar weakened ahead of key US economic data, including the Personal Consumption Expenditure (PCE) Price Index, Durable Goods Orders, Personal Spending for October, revised Q3 GDP growth estimates, and Initial Jobless Claims for the week ending November 22, all set to be released later in the North American session.
Despite the gain in EUR/USD pair, the overall outlook for the shared currency remains cautious as European Central Bank (ECB) officials have expressed concern about the Eurozone’s economic growth, both now and in the future, which could limit further strength for the Euro.
Uncertainty Over ECB's Economic Outlook and Rate Cuts Weigh on EUR/USD Pair
On the EUR front, the outlook for the Euro remains uncertain as the European Central Bank (ECB) is concerned about the Eurozone's economic growth. ECB policymakers are increasingly worried about the future, with some even fearing that inflation could fall below the bank's target.
On Tuesday, ECB policymaker Mario Centeno, who is also the head of Portugal's central bank, warned that the Eurozone economy is stagnating, and the risks are mainly on the downside. He also mentioned that the threat of tariffs, especially from the US under Trump, adds to these risks. Centeno cautioned that inflation could fall short of the ECB's target, suggesting that the bank should not wait too long before cutting interest rates.
On the other hand, ECB executive board member Isabel Schnabel has a more positive view on inflation, stating that the risk of inflation undershooting the target is not a major concern. She also hinted that if inflation remains in line with expectations, the ECB could gradually move toward a more neutral monetary policy.
Market participants are divided on the possibility of a rate cut in December, with some expecting a 50 basis point reduction. Investors are now waiting for upcoming inflation data, which could offer more clarity on the ECB's next move.
Hence, the uncertainty around the ECB’s economic outlook and potential rate cuts could weigh on the Euro, limiting its gains against the US Dollar. However, the possibility of a rate cut in December might provide some support for the EUR/USD pair.
US Dollar Weakens Amid Gradual Tariff Plans and Fed Rate Cut Expectations, Supporting EUR/USD
On the US front, the broad-based US dollar has recently lost some strength after hitting a two-year high last Friday. The US Dollar Index (DXY), which tracks the Greenback against six major currencies, dropped to a fresh weekly low around 106.35. This drop came after comments from Scott Bessent, a hedge fund manager nominated by President-elect Donald Trump for Treasury Secretary. Bessent stated that any tariffs imposed would be implemented gradually, and the budget deficit would be reduced without causing high inflation, easing some market fears.
Investors are now focused on the upcoming PCE inflation data, which is the Federal Reserve’s preferred measure for making policy decisions. Economists expect the headline PCE inflation to rise to 2.3% year-over-year in October, up from 2.1% in September. The core PCE, which excludes food and energy prices, is expected to rise by 2.8%, slightly higher than the previous month's 2.7%.
Therefore, the US dollar's recent weakness, driven by comments on gradual tariff implementation and expectations of a potential Fed rate cut, could support the EUR/USD pair. If PCE data signals lower inflation, it may reduce pressure on the Fed to hike rates.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.04850, down 0.03%, as the pair struggles to hold above key technical levels. On the 4-hour chart, the pivot point at $1.05203 serves as a significant hurdle, with immediate resistance at $1.05625 and further resistance at $1.06071.
A break above these levels could indicate a reversal of the recent bearish sentiment and open the door for further gains.
On the downside, immediate support lies at $1.04378, with additional levels at $1.03854 and $1.03489. The pair is currently hovering near its 50 EMA, which sits at $1.04776. This level is providing short-term support, but a sustained break below it could reinforce bearish momentum.
The RSI is at 49, reflecting a neutral bias but leaning slightly toward oversold territory. This suggests that while the pair is under pressure, it may find temporary relief if buyers step in near current support levels.
The outlook for EUR/USD depends heavily on its ability to regain traction above the $1.05203 pivot point. A failure to break this level could see the pair retest support at $1.04378, potentially triggering further declines. Conversely, a move above $1.05625 would indicate bullish momentum, shifting the focus toward higher resistance levels.
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